CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-PDD) Version 03 - in effect as of: 28 July 2006 CONTENTS

Transcription

1 page 1 CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-PDD) Version 03 - in effect as of: 28 July 2006 CONTENTS A. General description of project activity B. Application of a baseline and monitoring methodology C. Duration of the project activity / crediting period D. Environmental impacts E. Stakeholders comments Annexes Annex 1: Contact information on participants in the project activity Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring plan

2 page 2 SECTION A. General description of project activity A.1. Title of the project activity: Datang Wendeng Phase Ⅱ Wind Power Project PDD version 1.0 Completed on 25 th October 2011 A.2. Description of the project activity: Datang Wendeng Phase Ⅱ Wind Power Project (the proposed project) is located in Wendeng City, Shandong Province, and is developed by Datang Wendeng Clean Energy Development CO.,Ltd. The objective of the project is to generate renewable electricity from wind and sell the generated power to the North China Power Grid (NCPG). Based on the conditions of the project site, the developer is planning to install 33 wind turbines, each with a capacity of 1.5MW. The total installed capacity of the proposed project activity, therefore, will be 49.5MW. The expected net generation of the project activity is 90,685.9 MWh per year with the plant load factor of 20.91%. The PLF reflects the annual grid-connected output of the proposed project and has been determined by one qualified third party according to the guidelines from Annex11 of EB 48 th meeting. As the baseline scenario, comparable capacity or electricity generation addition provided by the NCPG, is dominated by the thermal power generation, the operation of the proposed project will lead to emission reductions of CO 2, which is estimated to be approximately 84,420 tonnes of CO 2 e per year. The proposed project will therefore help local government to promote the economy development and improve the air quality. The proposed project promotes local sustainable development through the following aspects: Reducing CO 2, SO 2 and NOx emissions; Creating local employment opportunity during the assembly and installation of wind turbines, and for operation of the proposed project; Reducing other particulate pollutants resulting from the fossil fuel fired power plants compared with a business-as-usual scenario. A.3. Project participants: Name of Party involved P.R. China (host) The United Kingdom Private and/or public entity(ies) project participants (as applicable) Datang Wendeng Clean Energy Development CO.,Ltd Blue World Carbon Capital PCC Party involved wishes to be considered as project participant (Yes/No) No No A.4. Technical description of the project activity:

3 page 3 A.4.1. Location of the project activity: A People s Republic of China A Shandong Province Host Party(ies): Region/State/Province etc.: Wendeng City A City/Town/Community etc: A Details of physical location, including information allowing the unique identification of this project activity (maximum one page): The proposed project is located within Wendeng City, Shandong Province, The project is divided into two area, the geographical coordinates of area one are around: East longitude 122 5'12"~122 7'58" and north latitude 36 55'3"~36 57'8"; the geographical coordinates of area two are around: East longitude 122 7'30"~122 9'23" and north latitude 36 58'1"~37 00'00". The Geographyical Location of the Project is shown in Figure 1 below.

4 page 4 Shandong Province Project Site Figure 1 Map showing the location of the Project A.4.2. Category(ies) of project activity: Category: Renewable electricity in grid connected applications Sector scope (1): Energy industries A.4.3. Technology to be employed by the project activity: The purpose of the Proposed Project Activity is the generation of electricity from wind and the supply of this electricity to the Grid. For the proposed project scenario, 33 units of wind turbines (Model type: WTG3-1500) with 1500KW unit capacity will be installed, providing a total capacity of 49.5MW.Total net annual generation of electricity is expected to be 93,162MWh. The main parameters of the wind turbine are shown in table 1. Table 1. Key Technology to be employed at the Project Wind Farm Key Technology Parameter Value

5 page 5 Rotor diameter (m) 87 Cut-in wind speed (m/s) 3.0 Rated wind speed (m/s) 10 Cut-out wind speed (m/s) 22 Rated voltage (V) 690 Rated power (kw) 1500 Expected life (year) 21(including 1 year construction period) Each turbine will have a transformer from 690V to 35kV, and are connected with the newly-built 110kV substation on the wind farm. The onsite substation is connected to the grid substation via 110kv transmission line. All the electricity generated by the wind farm will be transferred to the NCPG via the grid substation. The project scenario is the installation of 33 wind turbines with an aggregate capacity of 49.5MW. The wind turbines are estimated to generate on average 90,685.98MWh of electricity annually once fully operational. The expected load factor of 20.91% is determined by an independent qualified design institute in the FSR using detailed onsite information and long-term local wind data, in accordance with EB guidance on plant load factors (EB48 Annex 11). The net electricity supplied by the proposed project activity to the grid will be monitored through the main meter installed in the grid substation, recording exports to the grid (supply) and imports from the grid (consumption). There will be also electric meters of the wind farm as backups. Prior to the implementation of the project activity, the electricity was generated by grid-connected power plants. Without the implementation of the project, this scenario would have continued and is considered as the baseline scenario. As the NCPG is dominated by thermal power generation, the establishment of the proposed project activity will lead to greenhouse gas (GHG) emission reductions, estimated following the baseline methodology below. The proposed project involves no technology transfer from abroad. A.4.4 Estimated amount of emission reductions over the chosen crediting period: The project participants chose renewable crediting period. The ex-ante estimated average annual emission reductions over the first seven-year crediting period of the project are as follows: Table 2 Estimated amount of emission reductions over the chosen crediting period Years Annual estimation of emission reductions in tonnes of CO 2 e 01/04/ /12/ ,315 01/01/ /12/ ,420 01/01/ /12/ ,420 01/01/ /12/ ,420 01/01/ /12/ ,420 01/01/ /12/ ,420

6 page 6 01/01/ /12/ ,420 01/01/ /03/ ,105 Total estimated reductions (tonnes of CO 2 e) 607,075 Total number of first crediting years 7 Annual average over the crediting period of estimated reductions (tonnes of CO 2 e) 86,725 A.4.5. Public funding of the project activity: There is no pubic funding from Annex 1 Parties for this project. SECTION B. Application of a baseline and monitoring methodology B.1. Title and reference of the approved baseline and monitoring methodology applied to the project activity: Title of the approved methodology: ACM0002 Consolidated baseline methodology for grid-connected electricity generation from renewable sources (Version /EB 58/Annex 7, 26 November 2010, valid from 17 Sep 2010 onwards) Tools referenced in this methodology: Tool for the demonstration and assessment of additionality (Version 05.2 /EB 39/Annex 10) Tool to calculate the emission factor for an electricity system (Version /EB61/Annex 12) B.2 Justification of the choice of the methodology and why it is applicable to the project activity: This methodology is applicable to grid-connected renewable power generation project activities that (a) install a new power plant at a site where no renewable power plant was operated prior to the implementation of the project activity (Greenfield plant); (b) involve a capacity addition; (c) involve a retrofit of (an) existing plant(s); or (d) involve a replacement of (an) existing plant(s). Therefore, the methodology is applicable as the proposed project activity is the installation of a Greenfield, grid-connected wind power plant (a). The methodology is applicable under the following conditions: Criteria Applicability Conclusion The project activity is the installation, capacity addition, retrofit or replacement of a power plant/unit of one of the following types: hydro power plant/unit (either with a run-of-river reservoir or an accumulation reservoir), wind power plant/unit, geothermal power plant/unit, solar power plant/unit, wave power plant/unit or tidal power plant/unit The proposed project activity is the installation of a wind power plant. OK

7 page 7 In the case of capacity additions, retrofits or replacements: the existing plant started commercial operation prior to the start of a minimum historical reference period of five years, used for the calculation of baseline emissions and defined in the baseline emission section, and no capacity expansion or retrofit of the plant has been undertaken between the start of this minimum historical reference period and the implementation of the project activity In case of hydro power plants, one of the following conditions must apply: The project activity is implemented in an existing reservoir, with no change in the volume of reservoir; or The project activity is implemented in an existing reservoir, where the volume of reservoir is increased and the power density of the project activity, as per definitions given in the Project Emissions section, is greater than 4 W/m 2 ; or The project activity results in new reservoirs and the power density of the power plant, as per definitions given in the Project Emissions section, is greater than 4 W/m 2. The methodology is not applicable to the following: The proposed project activity is a Greenfield plant and does not represent a capacity addition to an existing plant. Not applicable. The proposed project activity is a wind power plant. OK OK Criteria Applicability Conclusion Project activities that involve switching from The proposed project activity does OK fossil fuels to renewable energy sources at the site of the project activity, since in this case the baseline may be the continued use of fossil fuels at the site; not involve switching from fossil fuels to renewable energy at the site of the project activity Biomass fired power plants Not applicable. The proposed project activity is a wind power OK Hydro power plants that result in new reservoirs or in the increase in existing reservoirs where the power density of the power plant is less than 4 W/m 2 plant Not applicable. The proposed project activity is a wind power plant In addition, the applicability conditions included in the tools referred to above apply. 1 Any conditions for the application of the tools are addressed in the sections below where the tools are used, sections B.5 and B.6, showing that the tools are applicable to the proposed project activity. In 1 The condition in the Combined tool to identify the baseline scenario and demonstrate additionality that all potential alternative scenarios to the proposed project activity must be available options to project participants does not apply to this methodology, as this methodology only refers to some steps of this tool. OK

8 page 8 addition, it is noted that: the project is a Greenfield project, therefore the Combined tool to identify the baseline scenario and demonstrate additionality is not required to identify the baseline scenario of the proposed project; and the project is a wind power project, there are no fossil fuels used for electricity generation, so there are no CO 2 emissions and leakage from combustion of fossil fuels, and thus the Tool to calculate project or leakage CO 2 emissions from fossil fuel combustion is not applicable to the proposed project. B.3. Description of the sources and gases included in the project boundary Spatial boundary: The spatial extent of the proposed project boundary includes Datang Wendeng Phase Ⅱ Wind Power Project (including wind fans, main transformer, transmission line and substation) and all power plants connected physically to the NCPG. The project boundary is shown in the figure below: Figure 2 Flow diagram of the project boundary Proposed Project Activity Project boundary onsite transformer station flow of electricity export import grid substation project electricity system connected electricity system Turbines Electricity meters EF: emission factor According to the delineation of grid boundaries as provided by the DNA of China, the NCPG, including Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia and Shandong 2, is the project electricity system, which is defined by the spatial extent of the power plants that can be dispatched without significant transmission constrains. The electricity transmission between different provinces in the NCPG is very large and it is unreasonable for the proposed project to regard the Provincial Power Grid as the project boundary. The connected electricity system is the Northeast Power Grid (NEPG), consisting of three provincial grids: Jilin, Liaoning and Heilongjiang, and Central China Power Grid (CCPG), consisting of six provincial grids: Jiangxi, Henan, Hubei, Hunan, Chongqing and Sichuan. Emission sources and gases: Following the methodology, only CO 2 emissions from electricity generation by fossil fuel fired power plant that is displaced due to the project activity are taken into account for determining the baseline emissions. According to the methodology, project emissions from geothermal, solar thermal and hydro 2 Chinese DNA designates it at

9 page 9 power plants need to be taken into account; there are no project emissions for a wind power plant, thus PEy = 0.The Emission sources and GHG included in the project boundary are as follows: Table 3 Emission sources and GHG included in the project boundary Source Gas Included? Justification / Explanation CO 2 emissions from CO 2 Yes Main emission source electricity generation in fossil CH 4 No Minor emission source. Baseline fuel fired power plants that are displaced due to the project activity N 2 O No Minor emission source. Project Activity Wind power plant CO 2 No According to the CH 4 No ACM0002(version N 2 O No ),the electricity is produced by wind resource, therefore there is no emission of CO 2,CH 4 and N 2 O. B.4. Description of how the baseline scenario is identified and description of the identified baseline scenario: Because the project activity is the installation of a new grid-connected renewable power plant/unit, and is not a modification/retrofit of an existing plant/unit, the baseline scenario, according to the methodology, is the following: Electricity delivered to the grid by the project activity would have otherwise been generated by the operation of grid-connected power plants and by the addition of new generation sources, as reflected in the combined margin (CM) calculations described in the Tool to calculate the emission factor for an electricity system. B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered CDM project activity (assessment and demonstration of additionality): CDM consideration The incentive from the CDM had been taken into account prior to the starting date of the project activity, aiming to obtain the additional funding to secure the project financially. In the feasibility study of the project, the potential revenue from CDM was analyzed and it was concluded that if the project were registered as a CDM project, the revenue from CDM would make the project financially attractive. Then the project owner decided to apply for CDM registration to overcome the financial barriers and signed the Emission Reduction Purchase Agreement with a CER buyer. The starting date of the Proposed Project Activity is after 02 August 2008, therefore, following EB guidelines (EB 49 Annex 22) the project participant informed the Host Party DNA and the UNFCCC secretariat in writing of the commencement of the project activity and of the intention to seek CDM status. These notifications were made within six months of the Proposed Project Activity start date as shown in the timeline below.

10 page 10 In addition to this confirmation of serious prior consideration of the CDM by the project participants, the description and timeline below indicates continuing and real actions to secure CDM status for the project. The timeline of the project is shown below: Time schedule of the implementation of the project Time Milestone 29 th.nov.2010 EIA approval letter issued Apr.2010 The feasibility study report has been compiled which considered the CERs by CDM. 30 th.apr.2010 FSR approval letter issued May.2010 Board meeting decided to apply for CDM. 30 th. Jun Notification of the intention to develop this project as CDM to UNFCCC 5 th. Jul Notification of the intention to develop this project as CDM to DNA Aug.2011 Emission Reduction Purchase Agreement signed 18 th.february.2011 Wind power facility purchase contract Additionality The approved methodology requires the use of the latest version of the Tool for the demonstration and assessment of additionality. The Tool consists of 4 steps as described below. Step 1. Identification of alternatives to the project activity consistent with current laws and regulations Realistic and credible alternatives to the project activity are defined through the following sub-steps: Sub-step1a. Define alternatives to the project activity: The demonstration about the alternative that provides outputs or services comparable with the proposed CDM project activity is as follows: a) The proposed project activity undertaken without being registered as a CDM project activity. Alternative a) is in compliance with all applicable legal and regulatory requirements. But according to the detailed analysis in step 2, this scenario is less attractive with low IRR and is not realistic without CDM financing. b) A fossil fuel-fired power plant with the comparable capacity or electricity generation. Taking into account the required capacity for the same annual generation, according to the current laws and regulations, it is not a realistic alternative (please refer to the analysis in sub-step 1b). c) A power plant using other source of renewable energy with the comparable capacity or electricity generation, such as PV, biomass and hydro, etc. Besides wind energy, other kinds of renewable energy technologies, such as solar PV, geothermal, biomass and hydro are possible grid-connected sources that could be used in China. However, due to the technology development status and the high cost for power generation, solar PV, geothermal

11 page 11 and biomass of similar installed capacity as the proposed project are not realistic alternatives in China 3. Biomass power generation also faces barriers and is difficult to be operated without policies& financial support, only hydropower projects can have an investment return rate that competes with that of wind power projects in China 4. However, due to dry climate and the lack of water resource recently years in project area, there is no commercially exploitable hydro power resource which can provide same electricity generation output as the proposed project activity. Therefore, this alternative is not realistic. d) Comparable capacity or electricity generation addition provided by the NCPG. Scenario d) is a realistic and feasible alternative which can provide outputs or services comparable with the proposed project and comply with applicable laws and regulations. Added capacity is dominated by thermal (coal-fired) power plants as determined in B.6. Sub-step 1b. Consistency with mandatory laws and regulations: According to Chinese regulations, coal-fired power plants of less than 135MW are prohibited from being built in areas covered by the large grids such as provincial grids 5. Therefore, a fossil fuel fired power plant with the same capacity as the proposed project activity, or with a capacity with comparable electricity generation, which would be 19MW 6, as described in alternative b in sub-step 1a, conflicts with Chinese regulations and practice. Alternative b, therefore, is not a realistic alternative. The other alternatives described in sub-step 1a are all in compliance with applicable legal and regulatory requirements. However, only comparable capacity or electricity generation addition provided by North China Power Grid (alternative d) is a realistic alternative consistent with current laws and regulations. Indeed, it is very common in the power grid to increase the generation output of some operating units to satisfy the load demand. According to the analysis in sub-step 1a and 1b, alternative (a) and alternative (d) are the realistic and feasible alternatives which comply with applicable laws and regulations. Step 2. Investment analysis The purpose of this step is to determine whether the proposed project activity is economically or financially less attractive than other alternatives, identified in step1, without the revenue from the sale of certified emission reductions (CERs). To conduct the investment analysis, use the following sub-steps: Sub-step 2a. Determine appropriate analysis method Notice on Strictly Prohibiting the Installation of Fuel fired Generators with the Capacity of 135MW or below issued by the General Office of the State Council, Decree No According to the China Electric Power Yearbook, (2010 Edition), China Electric Power Press, the average annual utilisation rate of thermal power units in China in 2008 was 4865 hours. A 19MW unit with average utilization rate could generate the same electricity as the proposed wind farm.

12 page 12 This step determines whether to apply the simple cost analysis, investment comparison analysis or benchmark analysis (sub-step 2b): Following the EB guidance on the assessment of investment analysis 7, if the alternative to the project activity is the supply of electricity from the grid, this is not to be considered an investment and a benchmark approach is considered appropriate. As the baseline alternative involves the continuation of current practices, supply of electricity from the grid, a benchmark analysis is used to identify whether the project is economically attractive (Option III). The use of a benchmark analysis is also in line with Chinese practice and is followed in the FSR. Therefore, the benchmark analysis (Option III) is adopted. Sub-step 2b Option III. Apply benchmark analysis According to the Interim Rules on Economic Assessment of Electrical Engineering Retrofit Projects issued by former State Power Corporation of China in 2002, the benchmark of total investment financial internal rate of return (IRR) of electric power industry is 8%, and only if the total investment IRR of the project is higher than or equivalent to this benchmark, the proposed project is financially feasible. Sub-step 2c. Calculation and comparison of financial indicators: The investment estimation in the Feasibility Study Report is based on national regulation, material and equipment price levels. The relevant data are listed in table 4: Table 4 Relevant indicators for financial assessment Item Value Data source Net supplied power to the grid 90, MWh FSR Static investment 48, Yuan RMB FSR Average annual O&M Yuan RMB FSR Free cash Yuan RMB FSR Depreciation ratio 6.4% FSR On-grid tariff (Including VAT) 0.61 Yuan RMB/kWh FSR Expected operational lifetime 20 years FSR Value added tax rate 17% FSR Income tax rate 25% FSR Education supplement tax rate 3% FSR Urban maintenance and construction tax rate 5% FSR CER price 10.5 /t CO 2 e Expected Table 5 shows the IRR of the project without and with CER revenue. It can be seen that IRR without CER revenue is below the benchmark 8% and with revenue from CDM at the CER price level, the proposed project would be more financially attractive. Table 5. Total investment analysis of the proposed project 7 Paragraph 19, Guidance on the Assessment of Investment Analysis (version 04), EB 61 Annex 13.

13 page 13 IRR without CDM with CDM revenue 5.27% 8.00% The revenue from the sale of CERs is expected to have a significant impact on the IRR. Although some uncertainties still exist, investors would gain reasonable financial return to reduce the risk. And the internal return rates,8.00% for total investments would appear more financially attractive for prospective investors. Sub-step 2d. Sensitivity analysis A sensitivity analysis is used for assessing the financial uncertainties by identifying the potential impact from changes in some key parameters such as capital investments, costs, prices, etc., on the economic performance of the proposed project. For a wind farm project without CDM funding, the factors that influences the IRR of total investment are mainly: 1) Static total investment; 2) Annual O&M cost; 3) Expected Tariff (Inc.VAT); 4) Annual output delivered to the grid. Assuming these four parameters change within a range between -10% and 10%, the outcome of the IRR analysis is presented in Table 6 and Figure 2 below. Table 6. IRR sensitivity analysis of the proposed project % -5.00% 0.00% 5.00% 10.00% Static total investment 6.56% 5.89% 5.27% 4.70% 4.17% Annual O&M Cost 5.64% 5.45% 5.27% 5.08% 4.90% Expected tariff (Inc.VAT) 3.72% 4.51% 5.27% 5.99% 6.68% Annual output delivered to the grid 3.72% 4.51% 5.27% 5.99% 6.68%

14 page 14 Figure 2 IRR sensitivity analysis for the proposed project When static total investment, annual O&M Cost, tariff and Annual output delivered to the grid changing range from -10% to 10%, IRR will not reach the benchmark IRR of 8%, and the result of investment analysis will also remain the same. Thus, the sensitivity analysis confirms that the Project faces a rigorous financial barrier and hence presents a clear additionality of the Project. The next sensitivity analysis examines the fluctuation of above four financial parameters when the project IRR reaches the benchmark, here is the result, see Table 7 given below. Table 7. Variation of financial parameters to make the project IRR reach 8% Variation of the parameters to make IRR reach the benchmark 8% Static total investment O&M cost Expected tariff (Inc.VAT) Annual grid connected output -19.4% -78.0% 20.0% 20.0% From the table 7, the change of static total investment is an important factor influencing the financial attractiveness of the proposed project. In the case that the static total investment is decreased by 19.4%, the IRR of the proposed project begins to reach the benchmark. However, as the prices, including equipments and commodities, also the labour costs have been increasing in recent years 8 ; regarding as the wind project, the cost of turbine, engineering construction and related accessories consist main budget of the investment. It is impossible for the static total investment to decrease by 19.4% under the circumstances that the price of equipments and materials and so on are increasing currently (due to the price increase of raw materials, e.g. steel and iron). A significant reduction in the level of investment is particularly unlikely. So the static total investment is not likely to decrease by 19.4%. Annual O&M cost comprises maintenance cost, salary, materials and other costs. Since all of these cost 8

15 page 15 are determined by long term operational experience, it is impossible to decrease the annual O&M cost as much as 78.0%. Thus it can be demonstrated that within the range of reasonable variations in key parameters as mentioned above, the conclusion that the proposed project is lack of financial attractiveness is still robust. The tariff increase by 20.0% the IRR of proposed project begins to exceed the benchmark. However there is extremely unlikely for the tariff of the proposed project to have an increase of 20%. Based on the notification on feed-in tariff policy issued by NDRC dated 20 July , China has been divided into four areas based on the wind resource conditions and construction conditions. The feed-in tariff for the four areas is 0.51RMB/kWh, 0.54RMB/kWh, 0.58RMB/kWh, and 0.61RMB/kWh. Jinan City, Shandong Province, where the proposed project is located, is classified as wind resource area IV. This means that the feed-in tariff for the proposed project is 0.61RMB/kWh certainly. Therefore the impact of variation in the expected tariff will not be addressed in the sensitivity analysis, and it is unlikely to increase by20.0% about the tariff of the proposed project. The annual net electricity delivered to the grid by the project activity would fluctuate annually along with the seasonal changes in wind power resource availability, along with the age increase in project operation, the time period needed for regular maintenance of wind equipment would also increase, which would tend to decrease the annual electricity generation. The expected annual electricity output of the proposed project indicated in the FSR was calculated based on historical wind data and electricity demand, therefore, a 20.0% increase in annual net electricity is not reasonable. To conclude, the sensitivity analysis shows that without CER revenue, IRR of the project is unlikely to reach the benchmark 8%, which supports the conclusion that the proposed project is not financially feasible without CDM support. Step 3. Barrier analysis Not applied. Therefore, the analysis proceeds to step 4. Step 4. Common practice analysis Sub-step 4a. Analyze other activities similar to the proposed project activity: In line with the EB guidance on the additionality tool, the common practice analysis shall cover similar projects in the same region and taking place in a comparable environment with regards to regulatory framework, investment climate, etc. In China, the regulatory framework and investment climate for wind farm projects can be called similar and comparable when the projects are connected to the same grid and located in the same Province. So here we only cover the wind power projects in Shandong Province. In April 2002, China implemented power sector reform to establish a more commercialized power market in China. Since market conditions for wind power project development changed significantly as a result of this sector reform, the common practice analysis excluded projects prior to April The common practice analysis excluded projects prior to 2002 and restricted to large scale project (using 9

16 page 16 the CDM definition of large scale: >15 MW). Also, other CDM projects activities are excluded in line with the guidance of the additionality tool. Using the statistics collated by Professor Shi Pengfei 10 of installed capacity of wind power in China in 2007, the wind farm projects similar to the proposed project activity are listed in Table 8 below. Table 8. Similar-scale Wind farm projects located in Shandong Province Name Commissioning date Capacity (MW) Note Shandong Jimo Qingdao Huawei Wind Farm Source: Statistics of domestic wind farm installation capacity in 2007, Shi Pengfei; Sub-step 4b. Discuss any similar options that are occurring: Obtained favourable loan and Foreign support as demonstration project The project listed in the table above is the only similar activities occurring which is not registered as a CDM activity.the Shandong Jimo project received financial support from a German company and it was also faced with financial barriers and applied for Voluntary Emission Reductions 11. All the other wind farms in Shandong have already successfully been registered or are applying as CDM projects in EB. Therefore, the wind power projects similar with the proposed project activity do not have common practice in Shandong Province. If Sub-steps 4a and 4b are satisfied, i.e. similar activities cannot be observed or similar activities are observed, but essential distinctions between the project activity and similar activities can reasonably be explained, then the project activity is additional. In conclusion, all the steps above are satisfied, the proposed CDM project is not the baseline scenario, and the project activity is additional. B.6. Emission reductions: B.6.1. Explanation of methodological choices: 1. Baseline Emission Calculation According to ACM0002, the baseline emissions include only CO 2 emissions from electricity generation in fossil fuel fired power plants that are displaced or influenced due to the project activity, calculated as follows: BE y EGPJ, y EFgrid, CM, y = (1) Where: BE y = Baseline emissions in year y (tco 2 /yr). 10 Statistics of domestic wind farm installation capacity in 2007, Shi Pengfei, see 11 The verification report of Shandong Qingdao Huawei Wind Power Project, Report No

17 page 17 EG PJ,y = The quantity of net electricity generation that is produced and fed into the grid as a result of the implementation of the CDM project activity in year y (MWh/yr). EF grid,cm,y = Combined margin CO 2 emission factor for grid connected power generation in year y calculated using the latest version of the Tool to calculate the emission factor for an electricity system. Calculation of EG PJ,y As the proposed project activity is the installation of a new grid-connected renewable power plant/unit at a site where no renewable power plant was operated prior to the implementation of the project activity, the following applies: EG PJ,y = EG facility,y Where: EG PJ,y is the quantity of net electricity generation that is produced and fed into the grid as a result of the implementation of the CDM project activity in year y (MWh/yr). EG facility,y is the quantity of net electricity generation supplied by the project plant/unit to the grid in year y (MWh/yr). The baseline emission factor (EF y ) is calculated as a combined margin (EF grid,cm,y ), consisting of the combination of operating margin (EF grid,om,y ) and build margin (EF grid,bmy, ) factors according to the following six steps defined in the Tool to calculate the emission factor for an electricity system. Data for the calculations are based on official national statistics books: China Energy Statistical Yearbook and China Electric Power Yearbook. Step 1. Identify the relevant electricity systems The power generated from the proposed project activity will be supplied to the grid. As the DNA has published a delineation of the project electricity system and connected electricity systems, these delineations are used. Following the DNA delineation, the project electricity system is the North China Power Grid (NCPG), consisting of six provincial grids: Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia and Shandong. The connected electricity system is the Northeast Power Grid (NEPG), consisting of three provincial grids: Jilin, Liaoning and Heilongjiang, and Central China Power Grid (CCPG), consisting of Jiangxi, Henan, Hubei, Hunan, Chongqing and Sichuan. There is electricity transferring from the connected electricity systems to the project electricity system, so the CO 2 emission factor for net electricity imports (EF grid,import,y ) from the connected electricity system should be determined using one of the following options for the purpose of determining the operating margin emission factor: (a) 0 tco 2 /MWh, or (b) The weighted average operating margin (OM) emission rate of the exporting grid; or (c) The simple operating margin emission rate of the exporting grid; or (d) The simple adjusted operating margin emission rate of the exporting grid. The option (c) is selected to calculated the CO 2 emission factor(s) for net electricity imports (EF grid,import,y ) according to the delineation.

18 page 18 The electricity imports from the Northeast Power Grid to the North China Power Grid has not changed significantly in recent years (see Annex 3), and the electricity from Central China Power Grid to North China Power Grid just started from 2006 and the imported electricity is negligible compared to the power generated from NCPG. So for the purpose of determining the build margin emission factor, the spatial extent is limited to the project electricity system according to the tool. Step 2. Choose whether to include off-grid power plants in the project electricity system (optional) Project participants may choose between the following two options to calculate the operating margin and build margin emission factor: Option I: Only grid power plants are included in the calculation. Option II: Both grid power plants and off-grid power plants are included in the calculation. Following the calculations of the DNA, and the statistical data available, Option I is chosen. Step 3. Select a method to determine the operating margin (OM) According to the tool, four various methods are provided for calculating the operating margin emission factor (EF grid,om,y ), including: a) Simple OM; b) Simple Adjusted OM; c) Dispatch data analysis OM; d) Average OM According to the tool, the Simple OM method (a) is applicable to the project if the low-cost resources constitute less than 50% of total grid generation in: 1) average of the five most recent years, or 2) based on long-term averages for hydroelectricity production Since generation from all sources (including hydro power) other than thermal plants were less than 1% of total generation in the NCPG in and this percentage has not changed significantly in recent years, the Simple OM method is applicable to the proposed project. The Simple OM emissions factor can be calculated using either ex-ante or ex-post data vintages. The project proponents have chosen to use the ex-ante option, and EF grid,om,y is fixed for the duration of the first crediting period. Ex ante option: A 3-year generation-weighted average, based on the most recent data available at the time of submission of the CDM-PDD to the DOE for validation, without requirement to monitor and recalculate the emissions factor during the crediting period. Step 4. Calculate the operating margin emission factor according to the selected method 12 Page 474, Electric Power in China (2006) by China Electricity Council

19 page 19 The Simple Operating Margin emission factor EF grid,om,y is defined as the generation-weighted average emissions per unit net electricity generation (tco 2 /MWh) of all generating sources serving the system, not including low-operating cost and must-run power plants. Two options can be selected to calculate the simple OM: Based on data on fuel consumption and net electricity generation of each power plant / unit (Option A); or Based on data on the total net electricity generation of all power plants serving the system and the fuel types and total fuel consumption of the project electricity system (option B). As data for options A is not available, and only nuclear and renewable power generation are considered as low-cost / must-run power sources and the quantity of electricity supplied to the grid by these sources is known, therefore, option B is chosen to calculate the OM emission factor, following the published DNA data and calculations. For Option B, the Simple OM emission factor is calculated based on the net electricity supplied to the grid by all power plants serving the system, not including low-cost / must-run power plants / units, and based on the fuel type(s) and total fuel consumption of the project electricity system, as follows: EF grid, OMsimple, y = i FC NCV ΕF iy, iy, co2, iy, EG y (2) Where EF is the simple operating margin CO 2 emission factor in year y (tco 2 /MWh) grid, OMsimple, y FC i,y is the amount of fossil fuel type i consumed in the project electricity system in year y (mass or volume unit) NCV i,y is the net calorific value (energy content) of fossil fuel type i in year y (GJ/mass or volume unit) EF CO2,i,y is the CO 2 emission factor of fossil fuel type i in year y (tco 2 /GJ) EG y is the net electricity generated and delivered to the grid by all power sources serving the system, not including low-cost / must-run power plants / units, in year y (MWh) i is all fossil fuel types combusted in power sources in the project electricity system in year y y, when using the ex-ante option, is the three most recent years for which data is available at the time of submission of the CDM-PDD to the DOE for validation On the basis of the data available, the three-year average operating margin emission factor is calculated by the DNA as a full-generation-weighted average of the emission factors 13 : EF grid,omsimlpe,y = tCO 2 /MWh Step 5. Calculate the build margin (BM) emission factor The sample group of power units m used to calculate the build margin consists of the set of power capacity additions in the electricity system that comprise 20% of the system generation (in MWh) and 13

20 page 20 that have been built most recently. 14 This option is chosen as it comprises larger annual generation than the five units built most recently. Following the deviation 15, the latest statistical data available (from the China Power Yearbook) is used by the DNA to determine the most recent year from which the added generation capacity is equal to or just exceeds 20% of the latest statistic year The added generation capacity is the sample group of power units m used to calculate the build margin. In terms of vintage of data, project participants can choose between option 1 ex-ante, and option 2 ex-post data vintages. The project proponents have chosen to use the ex-ante option, and EF grid,bm,y is fixed for the duration of the first crediting period. Option 1. For the first crediting period, calculate the build margin emission factor ex-ante based on the most recent information available on units already built for sample group m at the time of CDM-PDD submission to the DOE for validation. For the second crediting period, the build margin emission factor should be updated based on the most recent information available on units already built at the time of submission of the request for renewal of the crediting period to the DOE. For the third crediting period, the build margin emission factor calculated for the second crediting period should be used. This option does not require monitoring the emission factor during the crediting period. The build margin emissions factor is the generation-weighted average emission factor (tco 2 /MWh) of all power units m during the most recent year y for which power generation data is available, calculated as follows: EF grid, BM, y = m EG my, ELmy,, m EF EG my, (3) EF grid,bm,y is the Build margin CO2 emission factor in year y(t CO 2 /MWh); EG m,y is the Net quantity of electricity generated and delivered to the grid by power unit m in year y (MWh); EF EL,m,y is the CO2 emission factor of power unit m in year y (tco 2 /MWh); m is the power units included in the build margin; y is the most recent historical year for which power generation data is available. The CO 2 emission factor of each power unit m (EF EL,m,y ) should be determined as per the guidance in step 3 (a) for the simple OM. However, due to the limited availability of publicly available data, the DNA uses the accepted deviation mentioned in Step 4 to calculate EF BM, y, as follows: Use of capacity additions for estimating the build margin emission factor for grid electricity. Use of weights estimated using installed capacity in place of annual electricity generation. Using the latest statistical data available from China Energy Statistical Yearbook 2009 to calculate the different CO 2 emission percentage (λ i ) of solid, liquid and gas fuel in the total emission from thermal generation in the North China Power Grid in If 20% falls on part capacity of a unit, that unit is fully included in the calculation. 15 Deviation for projects in China (DNV, 7 Oct 05), see

21 page 21 Based the emission percentage (λ i ) of different kind fossil fuels and the corresponding emission factor (EF i ) according to the best technology commercially available in the China, the weighted emission factor of thermal power (EF thermal) is calculated. Using the latest statistical data available (from the China Electric Power Yearbook) determine the year from which the added generation capacity is equal to or just exceeds 20% of the capacity of the latest statistic year Regarding the added generation capacity above 20%, calculate the Build Margin through multiply the weighted emission factor of thermal power (EF thermal ) by the capacity percentage of the thermal power among the about 20% new capacity of And the EF grid,bm,y of North China Power Grid is tco 2 /MWh 16. (see Annex 3 for more details) Step 6. Calculate the combined margin (CM) emissions factor According to the tool, there are two methods for calculation of the combined margin (CM) emission factor, i.e. (a) Weighted average CM; or (b) Simplified CM, and the weighted average CM method (option a) should be used as the preferred option. The combined margin emission factor is calculated as follows: EF grid,cm,y = w OM EF grid,om,y + w BM EF grid,bm,y (4) Where EF grid,bm,y is the build margin CO 2 emission factor in year y (tco 2 /MWh) EF grid,om,y is the operating margin CO 2 emission factor in year y (tco 2 /MWh) w OM is the weighting of operating margin emissions factor (%) w BM is the weighting of build margin emissions factor (%). The default weights are used, i.e. for the wind farm projects in the first crediting period and the subsequent crediting period, w OM = 0.75 and w BM = On the basis of these weights for the first crediting period, the combined margin emission factor is calculated, and fixed ex-ante: EF grid,cm,y = tco 2 /MWh Using Operating Margin and Build Margin emission factors that are fixed for the duration of the first crediting period, the baseline emissions factor is also fixed for the first crediting period. These parameters will be recalculated at any renewal of the crediting period using the same steps 1-5 in the tool and the latest data available at that time. Table 8. Values obtained when calculating the baseline emission factor using ACM0002 Variable Value Operating Margin Emissions Factor (EF grid, OM,y in tco 2 /MWh) Build Margin Emissions Factor (EF grid, BM,y in tco 2 /MWh) Baseline Emissions Factor (EF grid,cm,y in tco 2 /MWh)

22 page 22 Baseline emissions (BE y ) now can be calculated as the combined margin CO 2 emission factor (EF grid,cm,y ) multiplied by the annual net generation of the Proposed Project (EG PJ,y ). 2. Project emission According to the methodology, for most renewable energy project activities, PEy = 0. However, the methodology prescribes project emission calculations for geothermal, solar thermal and hydro power plant. As a wind power plant, therefore, there are no project emissions according to the methodology: PEy = 0 3. Leakage According to the methodology, no leakage is considered for the proposed project. 4. Calculate Emission Reduction The emission reduction ER y by the project activity during a given year y is the difference between baseline emission (BE y ) and project emissions (PE y ), as follows: ER y = BE y PE y (5) Where the baseline emissions (BE y in tco 2 ) are the product of the baseline emissions factor (EF y in tco 2 /MWh) times the electricity supplied by the project activity to the grid (EG PJ,y in MWh). The calculation formula is as follows: BE y EGPJ, y EFgrid, CM, y = (6) As the project activity is the installation of a new grid-connected renewable power plant/unit at a site where no renewable power plant was operated prior to the implementation of the project activity, then: EGPJ, y = EGfacility, y = EGtogrid,y - EGconsumption,y Where: EGPJ,y is the quantity of net electricity generation that is produced and fed into the grid as a result of the implementation of the CDM project activity in year y (MWh/yr) EGfacility,y is the quantity of net electricity generation supplied by the project plant/unit to the grid in year y (MWh/yr) EG to grid,y is the quantity of annual electricity delivered to the grid by the proposed project(mwh); EG consumption,y is the quantity of annual electricity purchased from the grid by the proposed project(mwh). B.6.2. Data and parameters that are available at validation: FC i,y Data / Parameter: Data unit: Mass or volume Description: the amount of the fossil fuel i consumed in the project electricity system in year y Source of data used: China Energy Statistical Yearbook Value applied: See Annex 3 Justification of the Based on official national statistics choice of data or

23 page 23 description of measurement methods and procedures actually applied : Any comment: Data / Parameter: EG grid,y and EG m,y Data unit: MWh Description: Electricity supplied to power grid by included sources in year y Source of data used: China Electric Power Yearbook Value applied: See Annex 3 Justification of the Based on official national statistics choice of data or description of measurement methods and procedures actually applied : Any comment: Data / Parameter: NCV i Data unit: GJ/mass or volume unit Description: Net caloric value of fossil fuel type i consumed in the project electricity system in year y Source of data used: China Energy Statistic Yearbook Value applied: See Annex 3 Justification of the Based on official national statistics choice of data or description of measurement methods and procedures actually applied : Any comment: Data / Parameter: EF CO2,i,y and EF CO2,m,y Data unit: tco 2 /GJ Description: CO 2 emission factor of fossil fuel type i in year y Source of data used: Taken from DNA of China, see Original data used are the IPCC default values at the lower limit of the uncertainty at a 95% confidence interval as provided in table 1.4 of Chapter1 of Vol. 2 (Energy) of the 2006 IPCC Guidelines on National GHG Inventories Value applied: See Annex 3 Justification of the Based on official national statistics choice of data or description of measurement methods and procedures actually